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    Mrsboyd1's Avatar
    Mrsboyd1 Posts: 3, Reputation: 1
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    #1

    Oct 15, 2010, 03:24 PM
    How do I calculate a expected stock price
    The company has a current stock price of $36.00 and its last dividend was $2.40. In view of the company's strong financial position, its required rate of return is 12 percent. Dividends are expected to grow at a constant rate in the future what is the company's expected stock prices in five years?
    leloup's Avatar
    leloup Posts: 1, Reputation: 1
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    Nov 25, 2010, 11:21 AM
    Quote Originally Posted by Mrsboyd1 View Post
    The company has a current stock price of $36.00 and its last dividend was $2.40. In view of the company's strong financial position, its required rate of return is 12 percent. Dividends are expected to grow at a constant rate in the future what is the company's expected stock prices in five years?
    36 = 2.4 / (12%-g)
    g = 0.053 = 5.3%
    in 5 yrs:
    36(1+0.053)^5
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